Anyone Here Well-Versed in Life Estates?

Norm K · 02-21-2019, 04:41 AM

It looks as though my mom might need to sell her home and move in us so I've been trying to bone up on how we might protect her assets (as in, keep the government's hands off of what she and my late father worked for) and discovered the Life Estate. On the surface anyway, the Life Estate appears to be a tool by which she can use the proceeds from the sale of her home to purchase a percentage of mine in exchange for the legal right to remain in my home for the rest of her life. Then, upon her passing (at 85 and in relatively good health, we hope that's still a decade or more out) the investment she made in my home becomes mine, avoiding any probate proceedings in the process.

As in everything where the government is - or could potentially be - involved, I suspect it's not as simple as I'd like to hope and would like to know more.

Given the knowledge base in PPOT I'm guessing there's some pretty solid insight to be had here.

Thanks!

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ossiblue · 06:55 AM

Not sure, exactly, what you are looking for.

You state that your mother needs to sell her home. That act alone will expose her to whatever government taxes/restrictions are--think capital gains. Life Estates are for one's current home and server only to avoid probate. If, upon death, the owner's estate is valued at more than $5.2 million, the federal estate tax will be invoked anyway.

Using the proceeds of her home sale to buy into your home makes her a joint tenant in your property. At that point, you and she could deed the property to her as joint owner and you could set up a Life Estate with both as the "grantor" and "life tenant" and anyone else as the "remainder man." Understand that both of you, will have complete control and responsibility for the home during her life time. Upkeep, insurance, property taxes, will all be co-responsibility, technically.

From what you describe, it appears that you are looking to give up your home to include your mother to set up the Life Estate. That, IMO, would only be an advantage for her. If she buys into your home and becomes a joint tenant with rights of survivor to you, I cannot see a need for a Life Estate.

LakeCleElum · 02-21-2019, 06:45 AM

I can get you the phone # of a good tax attorney........Before being on his own, he worked for the IRS and is very sharp.

MRM · 02-21-2019, 06:58 AM

Before you do anything tricky, make sure there is a need to. The federal estate tax exemption is $11.4 million. I don't know what your state estate tax is, but check that exemption too. Primary residences are exempt from capital gains as long as the owner meets the residency requirements. Unless your mom has a significant estate she may not need to do any tax planning. If she does, she should set up a will or trust now and maximize her exemptions and start to put some of her assets into trusts or gift them in order to draw down her estate.

flatbutt · 02-21-2019, 08:30 AM

Consult a Certified Elder Law Attorney (CELA) . That's what I did, not cheap but worth it. Do it soon, the gov't AND nursing homes have a 7 year look back at her finances. I got caught out 2 months short of that time limit and had to forfeit the $30K I was holding for my Mom.